Illicit trade dampens the economy, destabilises legitimate industries, restrains innovation and investments, reduces government revenues, and hampers the health and safety of consumers. Moreover, globally, it fuels transnational crime, corruption and terrorism. India is no exception to this.
A report by KPMG-Ficci says smuggling in India takes place in various forms—misdeclaration, undervaluation, misuse of end-use, amongst others. The seizure value for misdeclared goods was Rs 1,187 crore in 2016, while that of undervalued goods was Rs 254 crore. The seizure value from misuse of end-use was Rs 2,780 crore, seeing a rise from Rs 953 crore in 2015—an increase of 190% y-o-y.
The most commonly counterfeited and smuggled goods are tobacco, cigarettes, electronic items, gold, machinery and parts, alcoholic beverages, auto components, fast-moving consumer goods and mobile phones. As per KPMG in India’s analysis on UN COMTRADE data for years 2012-16, the average annual smuggling of electronics is around Rs 3,430 crore.
Similarly, the average smuggling of gold for these years is Rs 3,120 crore, and machinery and parts Rs 5,913 crore. The percentage penetration of illicit trade in the cigarettes market increased from 15% to 21% over the years 2010-15. Factors like higher taxation rates, availability of cheaper alternatives, lack of awareness and lack of enforcement mechanisms are key factors that drive illegal trade in India.